Wash Sale


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Wash Sale

The buying and selling of the same or a similar asset within a short period of time.

A fictitious type of arrangement whereby a Broker, upon receiving an order from one individual to purchase and an order from another individual to sell a certain amount of a particular stock or commodity, transfers it from one principal to the other and retains the difference in value.

For the purposes of Income Tax, losses on a wash sale of stock may not be recognized as capital losses if stock of equal value is obtained within thirty days prior or subsequent to the date of sale.

Various stock exchanges disallow this practice because the orders to buy and sell should be executed separately to the advantage of each of the broker's clients.

References in periodicals archive ?
com/story/understanding-the-wash-sale-rules-2015-03-02) wash sale rule kicks in if an investor repurchases the same or a substantially identical investment within 30 days before or 30 days after selling the original investment at a loss.
Typically, if you acquire a bond with a different issuer, maturity, or coupon rate, your bond swap won't be considered a wash sale.
This new tool will enable investment managers to find out which previously sold securities, if replaced through a purchase transaction, would result in a wash sale.
An opposite and less desirable result that might occur because of a wash sale is the conversion of a short-term capital loss into a long-term capital loss.
If the client follows a "buy-and-hold" strategy--which is consistent with the professional money manager's belief in not selling during market downturns--the goal is to sell these shares without triggering the IRC section 1091 wash sale rule.
When a loss from a wash sale is disallowed, the deferred loss is added to the basis of the newly purchased securities.
A wash sale is the sale (disposition) of a security at a loss and the acquisition of a substantially identical security within a period beginning 30 days before and ending 30 days after the date of sale.
Not only can the Wash Sale Rule prevent you from taking a loss, but failing to account for wash sales can result in costly errors in cost basis calculations for both the stock sold at a loss and the security that triggered the wash sale," said Conlon.
Beware of the Wash Sales Trap (see sidebar, Page 18).
1091 at the end of 1988 to make it clear that purposes of the wash sale rule, options can he substantially identical to stock.
Short sales are subject to special tax rules that affect holding period and short-term/long-term gain/loss determinations and special wash sale rules.
Employees of the Development Bank of the Philippines (DBP) on Friday filed a graft complaint in the Office of the Ombudsman against 14 senior executives of the state-owned bank for allegedly shortchanging the government in the wash sale of P14.